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Meliá Hotels International Reaches A Binding Agreement For The Sale Of Seven Of Its Largest Resort Hotels In Spain To Starwood Capital Group For €176 Million, Retaining The Management Of The Hotels

Meliá Hotels International Reaches A Binding Agreement For The Sale Of Seven Of Its Largest Resort Hotels In Spain To Starwood Capital Group For €176 Million, Retaining The Management Of The Hotels

01-Mar-15

* The partnership will invest around €30 million on renovation of the hotels over the next two years, thereby simultaneously strengthening the re-launch of the Sol Hotels brand * The new joint venture will seek more hotels to be integrated, so it will be a growth vehicle, either for other properties currently owned by Meliá or third parties. * The deal supports Meliá’s commitment to reduce debt and to become “asset lighter”

1 March, 2015: Meliá Hotels International has reported to the Spanish Stock Exchange Commission a binding agreement in which a controlled affiliate of Starwood Capital Group will take a majority stake in seven hotels currently fully owned by the Spanish hotel company. The final completion of the transaction is subject to the final approval of bank financing, and clearance to be obtained by the EU Merger Control Office. Meliá announced the successful conclusion to the negotiations reported to the Commission on 9 December. The assets will be held by a new joint venture company in which a controlled affiliate of Starwood Capital owns 80% and Meliá 20%. The agreement also includes the continued management of the properties by Meliá under the Sol Hotels brand.

The deal between Starwood Capital, a leading global private investment firm with a core focus on real estate, and Meliá Hotels International, a world leader in resort hotels, marks the beginning of a fruitful relationship as part of a plan announced a few months ago to transform and reposition the Sol Hotels brand, which includes a large number of the company’s resort hotels. Meliá has created new and innovative concepts to adapt hotels to the needs and expectations of modern travellers and transform traditional “sun and beach” hotels into something more inspirational and competitive, just as it has already done with other brands such as ME by Meliá, Paradisus Resorts, or Innside by Meliá and other city hotels.

Meliá Hotels International’s CEO, Garbiel Escarrer, says,“The know-how and managerial excellence of Meliá combined with the financial strength and property expertise of Starwood will create a partnership that we hope will develop and deepen over time, and will also help improve our balance sheet and consolidate our leadership in the growing international resort industry”. This association will create unique opportunities to grow, and expand these new concepts throughout different locations and markets, and the transaction confirms the strong interest of global investors in having a presence in the Spanish hotel market. The fact that this deal has borne fruit on the basis of a joint venture to re-launch the Sol brand confirms the investment market´s interest in Meliá, and represents a unique opportunity for growth for both parties, both domestically and internationally.

The seven hotels included in the deal represent 2.933 keys, comprising the Sol Príncipe in Malaga, the Sol Lanzarote and Meliá Gorriones (Fuerteventura) in the Canary Islands, the Sol Ibiza and Sol Pinet Playa in Ibiza, and the Sol Mirlos and Sol Tordos (Palmanova, Mallorca). The hotels will all be fully refurbished, the two companies having designed a joint investment plan starting this winter that will see the renovation of hotel facilities and their adaptation to the new Sol Hotels product and service standards to bring about their immediate repositioning and provide a better response to the needs of modern leisure travellers.

After the changes, the Sol Príncipe, Sol Lanzarote, Sol Mirlos and Sol Tordos will continue to operate under the new Sol Hotels brand (with the Sol Mirlos and Sol Tordos being renamed as the Sol Palmanova). Sol Ibiza will become Sol Beach House Ibiza and, in 2016, Sol Pinet Playa will be renamed Sol House Pinet Ibiza. The main portion of the Meliá Gorriones property will continue to operate under the Meliá brand, and the current annex shall be rebranded to Sol Beach House Fuerteventura.

The deal is important in financial terms, given that it allows Meliá to deepen its debt reduction objectives through asset rotation, together with general improvements in the business and other positive impacts that will provide the company with a far healthier balance sheet to support strategic growth through management agreements and design its new Strategic Plan in 2015 for the following three years. The whole operation has been advised by CBRE.

As stated by Vice Chairman and CEO, Gabriel Escarrer, “Meliá’s strategy is succeeding in enhancing our leadership in hotel management, while also favouring the strategic growth we plan for our brands worldwide, strengthening a business which is increasingly robust, profitable and sustainable, supported by a select number of major JV partnerships such as the agreement with Starwood Capital.” A Value Proposition For Investment Funds

Partnerships with major international investment funds with AAA credit ratings for the rotation and enhancement of first-class resort assets is not new to Meliá. Two years ago, it sold the Sol s’Argamassa in Ibiza, now rebranded as the ME Ibiza, and created a joint venture along with the British investment fund London & Regional Properties, retaining management of the hotel. The results of the deal could not have been more satisfactory for both parties. In its first year, the new ME Ibiza was the first hotel in the Balearic Islands to be admitted to the exclusive group of Leading Hotels of the World, was named the best renovated hotel in Europe at the International Hotel Awards, and increased average revenue per available room (RevPAR) by almost 300% after its transformation.

More recently, Meliá has also joined forces with Avenue Capital, another major US investment fund, both on the Calvià Beach project and the Sol Aloha Puerto hotel in Málaga, covering a total of over 2.600 rooms. Avenue entered the Meliá project to renovate and reposition its hotels in Magaluf a few months ago, when it acquired the holdings of Meliá’s previous joint venture partner. Avenue brings greater financial muscle to a project which in 2015 and 2016 will see one of the most important phases of the transformation of Magaluf: renovation of 1.500 rooms in four hotels, and the demolition and reconstruction of the former Sol Jamaica, raising its official category and adding extensive leisure and shopping facilities.

Bringing major international investment funds into the ownership of selected company assets and at the same time attracting first-class financial partners, has generated significant benefits for Meliá, facilitating its asset-light strategy, allowing acceleration of product improvements and enhanced value of its hotel brands which helps stimulates company growth. It is also an effective way of improving mature destinations by providing incentives to attract important foreign investors who would otherwise not consider such areas for investment. Meliá estimates that once the investment programmes have been executed, the resulting asset value of the properties held in multi-property partnerships with such investors will be around 800 million euros.

Far from being a one-off deal, the agreement signed today with Starwood Capital forms part of a major new strategy for Meliá’s mid-scale resort hotels, both in Spain, where the resort industry broke all records in 2014, maintaining the country’s position as the third most popular tourist destination in the world, and also in other destinations worldwide in which Meliá continues to grow and consolidate its leadership.

About Meliá Hotels International

Founded in 1956 in Palma de Mallorca (Spain), Meliá Hotels International is one of the largest hotel companies worldwide as well as the absolute leader within the Spanish market, with more than 370 hotels (current portfolio and pipeline) throughout more than 40 countries and 4 continents under the brands: Gran Meliá, Meliá Hotels & Resorts, Paradisus Resorts, ME by Meliá, Innside by Meliá, Tryp by Wyndham and Sol Hoteles. The strategic focus on international growth has allowed Meliá Hotels International to be the first Spanish hotel company with presence in key markets such as China, the Arabian Gulf or the US, as well as maintaining its leadership in traditional markets such as Europe, Latin America or the Caribbean. Its high degree of globalization, a diversified business model, the consistent growth plan supported by strategic alliances with major investors and its commitment to responsible tourism are the major strengths of Meliá Hotels International, being the Spanish Hotel leader in Corporate Reputation (Merco Ranking) and one of the most attractive to work worldwide.

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